Thirty years ago today

It’s 30 years since Margaret Thatcher became Prime Minister, and there are still arguments about her legacy (at least in some places: the Conservative Home blog, whose picture I also used, has a post headed, “Margaret Thatcher was the greatest peacetime Prime Minister of modern times but Conservatism can’t fossilise”.)

For me, one chart sums up her legacy. It’s the one which shows a large and lasting change in the levels of inequality in British society, which her successors of either political stripe have done nothing to reverse. The vertical lines show the period of Thatcher’s premiership.

The chart above show Britain’s gini coefficient – a the most commonly used measure used internationally to show changes in equality levels within societies. (National Statistics has a useful guide as to how it is calculated).

For people who don’t trust such indices, one can look at it different way, by measuring the number of people who are earning 60% or less of the average income, and the chart looks almost the same.

Of course, there will be people who wonder why it matters. The increases in inequality in both the UK and the US came with their own intellectual justification, the so called ‘supply side‘ or ‘trickle down‘ economics model, which said that the wealth created by the richer would be spent and reach the poorer (and therefore what the rich needed was tax cuts). Indeed, Jack Kemp, who persuaded Reagan of the virtues of supply side economics, died at the weekend.

We know that supply-side economics doesn’t work (actually, quite a lot of people said that at the time) and that significant levels of inequality are fundamentally bad for social outcomes – not just bad for the people who are relatively poorer as a result, but also for the people who are richer.

Some readers will recognise here the argument of the authors of The Spirit Level, by Richard Wilkinson and Kate Pickett. The data seem fairly compelling (even if John Kay, in the Financial Times, thinks they are over-claiming on the basis of the evidence they present). It is summarised well (opens in pdf) by Wilkinson:

Now that we have comparable measures of the scale of income inequality in different societies we can actually see what effect it has. The new evidence shows that inequality is much the most important explanation of why, despite their extraordinary material success, some of the most affluent societies seem to be social failures. In societies where income differences between rich and poor are smaller, the statistics show that community life is stronger and more people feel they can trust others. There is also less violence – including lower homicide rates; health tends to be better and life expectancy is higher. In fact most of the problems related to relative deprivation are reduced; prison populations are smaller, teenage birth rates are lower, maths and literacy scores tend to be higher, and there is less obesity. …Most of the effect of inequality is the result of worse outcomes across the vast majority of the population. In a more unequal society, even middle class people on good incomes are likely to be less healthy, less likely to be involved in community life, more likely to be obese, and more likely to be victims of violence.

Thirty years is long enough to start seeing some of the second generation effects of significant inequalities, even if we don’t fully understand yet their inter-connections. We’ve already seen the end, pretty much, of social mobility in Britain over this period. Some of the effects, as you read Wilkinson’s list above, have spilled out into public debate about the notion of “the underclass”, although much of this comes already politically loaded. (There’s a good discussion of why this might be in Soundings, for those with a taste for more theoretical political discussion). My instinct is that generally our data tend to underestimate the effect of social stress on health and social outcomes for the more affluent, but life expectancy is the best proxy. John Kay’s misgivings (and I write this as a fan of Kay’s work generally) come from a view of the world which says (by way of a gross simplification) that even if money can’t buy happiness it can buy assurance. The question raised by inequality is whether this is the case or not.

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